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Eucalyptus Berhad, a limited company, closes its accounts on March 31 every year. The
company reported the following unadjusted trial balance on March 31, 2017:

Debit Credit
Revenue 1,049,800
Cost of sales 584,200
Intangible asset 60,000
Property, plant and equipment (at book value) 822,100
Long term investment 200,000
Inventories 76,700
Trade receivable (at realisable value) 52,800
Cash and cash equivalent 93,900
6% Loan from bank 100,000
8% Note receivable 30,000
Trade payable 75,600
Administrative expenses 183,900
Distribution expenses 86,900
Income tax 9,600
Prepaid insurance 5,000
Income from investment 80,200
Ordinary share capital 500,000
Retained earnings (as on April 1, 2016) 442,400
Dividend 42,900
2,248,000 2,248,000

The followings are yet to be adjusted as at year end:

1. The inventory has a net realisable value of RM75,000.

2. The loan from bank was obtained on October 1, 2016. No interest has been paid to date.

3. The note receivable was received on January 1, 2017. The amount due, together with its
interest, are to be received on June 30, 2017.

4. The prepaid insurance was paid on December 28, 2016, for 6 months beginning January
2017. Insurance is part of administrative expense.
5. Property, plant and equipment consists of:

Cost Accumulated Depreciation

Freehold land 400,000 -
Building 350,000 105,900
Office equipment 305,000 127,000

Additional information regarding property, plant and equipment:

a. Freehold land is revalued to RM480,000.

b. Building is depreciated at 5% per annum on straight line method.
c. Office equipment is depreciated at 20% per annum on diminishing balance method.

6. Intangible asset was acquired on April 1, 2016 and provide legal life over 15 years.
However, it is expected to benefit the company only for 10 years.


Prepare statement of profit or loss and other comprehensive income, and statement of changes in
equity for the year ended March 31, 2017, and statement of financial position as at that date.

Royal Bhd. is one of the highly reputable companies in Klang Valley especially among the
Bumiputra companies. The company has had a very impressive track record for over 30 years. The
company was planning to further expand its operation in Penang. On 1 January 2016, Royal Bhd.
acquired the following:

I. A land

The land was situated in a housing area in Penang and was acquired for RM5,000,000. The
company intended to construct a warehouse on the land. However, situated on the land was an old
building. On 31 January 2016, the company had demolished the old building, incurring cost of
RM30,000. The company however managed to sell some scrap metals and steels from the old
building for a total amount of RM2,000. The construction of the warehouse was subsequently
carried-out on 1 February 2016 and completed on 31 December 2016. The details of the costs
incurred by Royal Bhd. in acquiring the land and constructing the warehouse were as follows:

Costs (RM)
Legal fees and purchase contract of the land 7,000
Contractors’ costs 2,000,000
Architect’s fees 100,000
Labour costs 800,000
Material costs for warehouse construction 1,500,000
Directly attributable construction overhead costs 500,000
General administrative costs 200,000
Insurance 100,000
Permit to build the warehouse in the housing area 20,000

Additional notes:
 During the period of the construction, the company had faced a problem with some of its
workers, resulting in the incurrence of abnormal losses of RM15,000. The problem was
eventually resolved.

 Included in the contractors’ costs was RM100,000 spent on rectification while 30% of
the architect’s fees were attributable to services performed for another project. 2% of the
direct material and labour costs were associated with excessive wastage of materials
while 10% of the general administrative costs were the costs incurred in searching for
the land title as well as in processing the acquisition of the land. 40% of the insurance
cost was associated with the construction of the warehouse while the remaining balance
was attributable to the company’s inventories.

II. A plant

On 1 June 2016 Royal Bhd. bought a new plant costing RM80,000. The plant was
expected to have a useful life of 5 years with a residual or salvage value of RM20,000.
However, it was the policy of the company to replace its plant with a new one every 4

It was the policy of Royal Bhd. to depreciate all of its non-current assets using the
straight line method.


a) Advice Royal Bhd. on how it shall deal with the acquired land and warehouse in Penang
and show how the initial costs of those assets are being measured, in accordance with
MFRS 116 Plant, Property and Equipment.
(10 marks)

b) Assist Royal Bhd. on how to compute the depreciation for the new plant acquired and
clearly explain the basis that was used in estimating the amount of depreciation to be
provided for.

c) Suppose at the end of 31 December 2016, the market price of the warehouse had
increased by 10% following the completion of the high-way opposite the warehouse.
Briefly explain how Royal Bhd. shall account for the revaluation upward of those assets
in accordance with MFRS 116 Property, Plant and Equipment.
(3 marks)

d) Comment on whether or not Royal Bhd. shall estimate and disclose the value of its
reputation that was deemed part of the company’s goodwill.
(3 marks)



Peppermint Sdn. Bhd. (PSB) is a manufacturing company that produces a product called AAZZ.
The production of AAZZ requires two types of raw materials, AA and ZZ. 1 unit of AA and 2
litres of ZZ are used to produce one unit of AAZZ.

PSB purchases AA from Clove Sdn. Bhd., who have agreed to give a trade discount of 5% if
PSB purchases at least 4,000 units of AA. ZZ is supplied by Cinnamon Berhad. Cinnamon will
also give a 5% trade discount if PSB purchases at least 8,000 litres of ZZ. Opening balance on
July 1, 2016 shows a balance of 1,000 units of AA (cost RM12 each) and 2,500 litres of ZZ
(valued at RM62,500).

The following table presents the purchases of AA and ZZ for second half of 2016. Price shown
below is before trade discount.
Units purchased Price per unit Units purchased (litre) Price per litre
2/8/2016 3,800 RM13.20 7,500 RM28.00
12/9/2016 3,700 RM14.60 8,400 RM30.00
4,400 RM15.20 7,200 RM32.30
4/12/2016 4,000 RM15.00 8,000 RM36.00

The raw materials were sent to the factory for the production of AAZZ on the following dates,
based on the amount needed for production:

Date Production of AAZZ (Units)

22/8/2016 4,200
10/11/2016 5,500
16/12/2016 4,800

PSB uses perpetual inventory system. AA is valued using FIFO method while ZZ is valued using
weighted average method.
a) Calculate the ending inventory for AA at the end of December 2016.
(6 marks)
b) Calculate the ending inventory for ZZ at the end of December 2016.
(5 marks)
c) Calculate the cost of raw materials incurred in the production of AAZZ during the second
half of 2016.
(2 marks)
d) The physical stock take carried out at the end of December 2016 showed that there are
actually 2,300 units of AA and 4,000 litres of ZZ in store. Prepare journal entries to adjust
the ending balance of AA and ZZ.
(2 marks)


Rosemary Berhad is a distributor of New Zealand dairy products in Malaysia. The relevant
account balances of Rosemary on December 31, 2016 are shown below:

Trade receivables:
- Retailer 1 RM26,000
- Retailer 2 RM14,000
Allowance for doubtful debt RM1,000

It is the policy of the company to:

- Allow a trade discount of 2% if value of purchases exceeds RM50,000.
- Offer a credit term of 4/30, net 60 to all its customers.
- Write off trade receivable that is still outstanding after 6 months from the date of sale.

The following transactions occurred in the year 2016:

Feb 19 Received payment from Retailer 1 for full settlement of outstanding

Apr 5 Sold goods to Retailer 3, RM8,000 on credit.
May 15 Write off Retailer 2 account.
June 1 After discussion with Retailer 2, Rosemary agreed to accept
RM4,000 cash, paid immediately, as part settlement of the
outstanding amount. The balance is paid using 5%, 9-month note
July 18 Sold goods to Retailer 1, RM60,000 on credit.
Aug 16 Received payment from Retailer 1 for full settlement of outstanding
Oct 6 Write off Retailer 3 account.
Nov 5 Sold goods to Retailer 1, RM55,000 on credit.
Dec 31 It is estimated that 2.5% of trade receivables will be uncollectible.


a) Prepare the ledger accounts of Retailer 1, Retailer 2 and Retailer 3 for the year 2016 to
record the above transactions.
(6 marks)
b) Prepare the ledger account of Allowance for Doubtful Debts for the year 2016 and calculate
bad debt expense for the year.
(2 marks)


At the beginning of January 1, 2016, Lemongrass Berhad showed the following balances in its
Statement of Financial Position:
Other assets 1,600,000
Cash 800,000

Ordinary share capital, 1,200,000 issued and paid-up 1,200,000

4% Preference share capital 500,000
Retained earnings 640,000
Dividends payable 60,000

The following transactions occurred during the year ended December 31, 2016 but have yet to be

January 20 Paid dividends payable to shareholders.

April 28 Offered right issue to existing shareholders, with the right to
purchase one shares for every 100 shares held, at RM1 lower than
the market price. Market price on the date was RM5. All offers
were taken up.
August 14 Issued 50,000 ordinary shares at RM6 per share.
October 15 Declared and distributed one-for-fifty share dividend to
shareholders on record. Market value per share was RM4.
November 8 Declared cash dividend to ordinary shareholders of RM0.05 per
share, subject to approval at the forthcoming annual general

December 1 Issued 7%, five-year bonds payable with a RM250,000 par value
at the price of RM271,880.
December 20 Payment of cash dividend to ordinary shareholders has been
approved. The money will be credited to ordinary shareholders in
January 2017.
December 31 Paid dividend to preference shareholders.
Declared cash dividend to ordinary shareholders of RM0.05 per
share, subject to approval at the forthcoming annual general

a) Journalise the above transactions. Narrations are not required. Where no entries are required,
state your justification.
(9 marks)
b) Prepare the statement of financial position of Lemongrass Berhad as at December 31, 2016.
(3 marks)


Platinum Berhad received the bank statement for March 2017 from its bank, Falah Islamic
Bank. As an account executive for Platinum Berhad, you have been asked to reconcile the
balance on its bank statement to the bank account in its cash account. The following is the bank
statement and cash account as presented by the company for the month of March 2017:


37, True Valley City
58000 Kuala Lumpur Page: 1 of 1

Account No: 0987-65-4321 Statement date: 31/3/2017

Platinum Berhad Balance last statement: 15,377

7-7, Central Avenue Total Credits: 45,694
Travers Road Total Debits: 28,729
50470 Kuala Lumpur Balance this statement: 32,342

Date Description Cheq De Cre Balanc

ue bit dit e
1/3/20 Beginning balance RM15,
17 377
3/3/20 Payment from 3769 1,6 13,680
17 account 3 97
5/3/20 Cheque deposit 1,79 15,478
Cash Account
Date Description Amount Date Description Chq. No. Amount
2017 RM 2017 RM
Mar 1 Balance b/d 13,036 Mar 5 # TP - Ceria 37701 9,257
2 Cash 1,798 6 TP - Damai 37702 4,010
12 * TR-Salam 4,997 10 Loan payable 37703 8,220
15 TR-Sinar & Co 1,300 15 Petty cash 3,295
16 TR-Qaseh 10,200 20 TP - Mulia 37704 1,350
25 TR-Suci 3,370 22 TP - Aman 37706 425

31 Balance c/d 8,043

34,600 34,600

* TR - Trade receivable # TP - Trade payable
Additional information:
1. Two cheques were outstanding as at 28 February 2017: No. 37693 for RM 1,697 and No.
37697 for RM 745.
2. The dishonoured cheque was received from a credit customer, Ramadhan Sdn. Bhd.
3. Cheque No. 37705 for Sinar & Co for other expenses was entered in the cash account as a
receipt instead of as a payment.
4. A cheque received from Salam Sdn Bhd for RM 4,997 was wrongly entered by the bank as
RM 4,779.
5. The credit memorandum is for collection of note receivable amounted to RM17,400 by the
bank on behalf of the company. The bank had deducted RM 30 of collection fee crediting it to
company account.
6. All dividends are credited directly to the bank account. No entries have been made in the
cashbook during March 2017.
7. All receipts are banked and all payments are made by cheque.

a) Show necessary adjustments in the Cash Account of Platinum Berhad.

(9 marks)

b) Prepare the bank reconciliation for the company as at 31 March 2017.

(3 marks)

c) Briefly explain three advantages of preparing bank reconciliation statement to a business.

(3 marks)


a) MFRS 118 Revenue specifies five conditions that must be satisfied in order to recognise
revenue from the sale of goods. State two (2) of these conditions.
(2 marks)

b) Indicate whether you agree or disagree with the decision of the company. If you agree,
justify your answer. If you disagree, suggest the correct treatment.

i. Company A bought a passenger car on hire purchase basis under the financing of Bank
Z. Bank Z is the legal owner of the passenger car until Company A has paid the
financing in full.

Therefore, Company A decided not to record the passenger car as its asset and did not
account for depreciation.

ii. All products sold by Manufacturer B come with a two-year warranty. Based on past
experience, Manufacturer B can make a reliable estimation of how much will the
warranty costs be in the future.

Therefore, Manufacturer B decided to account for provision of warranty.

iii. Company C causes contamination but cleans up only when required to do so under the
law. The country in which it operates has had no legislation requiring cleaning up, and
the entity has been contaminating land in that country for several years. At 31 December
2016 it is virtually certain that a draft law requiring a clean-up of land already
contaminated will be enacted shortly after the year-end.

Therefore, Company C decided to disclose this information in its notes to the accounts.

iv. D Berhad is involved in a legal dispute with its supplier in relation to the early
termination of contract. D Berhad is seeking damages of RM10 million. The directors of
D Berhad believe they will win the legal suit. The lawyers of D Berhad have advised
that it is 80% probable D Berhad will win and receive the RM10 million.

Therefore, D Berhad decided to recognize the RM10 million as receivable.

(8 marks)